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Orexigen (OREX) Tumbling on FDA Delay for New Obesity Drug

Shares of Orexigen Therapeutics (OREX) fell 14.68 percent to $5.81 on June 11, after the company announced that the Food and Drug Administration (FDA) decided to delay the review of its new drug application.

The extension for FDA reviewing Orexigen’s new weight-loss drug, know as Contrave (NB32), has been set for September 11,2014. In a press release, Orexigen stated that the FDA wanted more time to “reach agreement on the post-marketing obligation related to the previously agreed upon evaluation of cardiovascular (CV) outcomes for NB32.”

The new drug application resubmission package includes interim safety and CV outcomes data from the ongoing 8,900 patient Light Study. Discussion around the package insert and other post-marketing obligation are ongoing.”

Contrave, Orexigen’s flagship chronic obesity treatment that will be marketed by Takeda Pharmaceutical (TKPYY) . The FDA refused to approve the drug in 2011, citing concerns about cardiovascular risk. Orexigen resubmitted its application to regulators in December 2013, stating that the drug fared well in an early analysis of a study designed to rule out excessive cardiovascular risk. Now it’s the third shot.

New obesity drugs from Vivus (VVUS) and Arena Pharmaceuticals (ARNA) were widely considered to be blockbusters when they were approved in 2012. The FDA initially rejected Qsymia, sold by Vivus, and Belviq, sold by Arena, before ultimately approving both.

Vivus reported Qsymia sales of $9.10 million in its most recent quarter. Arena reported sales of $8.40 million for its drug Belviq for Q1 of fiscal 2014.

Is OREX Still Worth To Wait?

Comparing with its rivals, Orexigen has had a difficult time, a trend that may continue due to the delay of its new drug’s approval.

Like any other small-cap biotech company, Orexigen’s ultimate success or failure relies entirely on the FDA and the clinical results it uses. Contrave could create a cash cow that would mean massive returns for Orexigen shareholders, it could also fail to demonstrate its effectiveness and render Orexigen a company whose prospects are as nonexistent as its current revenues.

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